Tuesday, October 28, 2008

The Fed Has Already Cut Fed Funds Rate Below 1%

Barrons: The consensus of Fed watchers and the futures market is that the FOMC will cut its federal-funds rate target another 50 basis points (half percentage point) to 1% when it announces its decision tomorrow (Wednesday) at 2:15 PM EDT. That would leave the Fed's main policy rate at its previous nadir touched in the past cycle and would, in effect, leave it relatively few basis points left to cut before the funds rate reached zero.

MP: The Fed has already effectively cut the Fed Funds rate to below 1%, despite its 1.5% target, see chart above (click to enlarge) comparing the Fed Funds target rate and the actual, effective Fed Funds rate over the last two weeks.


At 10/28/2008 12:19 PM, Anonymous Anonymous said...

crazy times we are living in; what are your predictions for rates in the next year?

Jesse W.

At 10/31/2008 4:20 PM, Anonymous Anonymous said...

Don't they remember the lesson of Japan? Their central funds rate went to zero and it didn't save them from more than a decade of economic malaise.


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